Commerce Department Proposes New Controls of Marine Toxins Exports
Department's Bureau of Industry and Security Also Shifts Strategy for Emerging and Foundational Technologies
- The U.S. Department of Commerce's Bureau of Industry and Security (BIS) issued a rule proposing unilateral controls on exports of four naturally occurring marine toxins relying on criteria in Section 1758 of the Export Control Reform Act of 2018 (ECRA).
- In issuing the proposed rule, BIS signals an important change in approach for identifying emerging and foundational technologies under ECRA, no longer distinguishing between the two terms.
- The proposed rule requests public comments by June 22, 2022, to help BIS determine what level of controls are appropriate for the toxins and related technology, and what impacts the controls will have on domestic capacity.
- Once the proposed rule becomes final, the controlled toxins and related technology will be considered "critical technologies" for purposes of the Committee on Foreign Investment in the United States (CFIUS) mandatory notification requirements.
The U.S. Department of Commerce's Bureau of Industry and Security (BIS) on May 23, 2022, published in the Federal Register a proposed rule that would place unilateral export controls on four naturally occurring marine toxins – brevetoxin, gonyautoxin, nodularin and palytoxin. The marine toxins, though naturally occurring, can potentially cause casualties to humans and animals, degrade equipment, or damage crops or the environment. BIS claims that new synthesis methods allow the toxins to be more easily isolated and synthesized, and thus are at greater risk of being exploited for biological weapons purposes.
Specifically, the rule proposes the addition of the toxins to the Commerce Control List (CCL) under Export Control Classification (ECCN) 1C351. BIS requests public comments from interested parties to ensure that the scope of the proposed controls are appropriate and will be effective. This includes information on 1) whether the proposed controls are clear and adequately identify "emerging and foundational technologies" within the context of biological weapons-related capabilities and developments; 2) the current domestic capability for the production and development of the toxins and related technology; 3) the effect that implementation of the proposed controls would have on the future domestic development or production of the toxins and related technology; and 4) the effectiveness of the proposed controls in terms of limiting the proliferation of such toxins and related technology abroad. The last day to submit a public comment to BIS is June 22, 2022.
Notably, BIS states in the proposed rule that while the toxins would be controlled under the mandate of Section 1758 of the Export Control Reform Act of 2018 (ECRA), which gave the Commerce Department the authority to regulate the export, reexport or transfer (in-country) of emerging and foundational technologies, the toxins will not be bucketed as either "emerging" or "foundational." Instead, BIS will refer to the marine toxins as "Section 1758 technologies." This decision comes after industry stakeholders have expressed concerns with the lack of clear guidance on what technologies qualify as "emerging" or "foundational." Neither Section 1758 nor any other section of ECRA defines the terms "emerging technology" and "foundational technology" or provides any guidance for differentiating between the two terms. BIS notes that the proposed rule demonstrates many of the difficulties that the agency faces in attempting to draw useful distinctions between "emerging" and "foundational" technologies. As naturally occurring substances, the four marine toxins alone could not be deemed "emerging" and thus could be classified as "foundational." Yet, the novel synthesis and collection of these toxins could be deemed "emerging."
Moving forward, the marine toxins and all technologies identified pursuant to Section 1758 of ECRA will be characterized as "Section 1758 technologies" without drawing a distinction between "emerging" or "foundational." Of note, ECRA does not require BIS to differentiate between emerging technologies and foundational technologies. BIS hopes that the change in approach will facilitate a more efficient interagency review of implementing regulations and result in more timely implementation of export controls on Section 1758 technologies.
Of particular importance, BIS clarifies that the change in characterization will not affect the designation of "critical technologies," for purposes of Committee on Foreign Investment in the United States (CFIUS) screenings because technologies identified pursuant to Section 1758 of ECRA are considered "critical technologies," regardless of whether such technologies are described as "emerging" or "foundational." Since the adoption of ECRA, the Commerce Department has added a number of entries to the CCL with the words "emerging technologies," taking the position that once added to the list, the industry would be on notice that the item qualifies as "critical technology" for purposes of determining mandatory filing with CFIUS. With the new approach by BIS, such designation as an "emerging technology" will no longer be necessary. Once the proposed rule becomes final, not only will the controlled toxins and related technology be subject to more stringent export controls, such toxins and related technology also will be subject to CFIUS mandatory notification requirements. As a result, foreign investments in U.S. businesses that produce, design, test, manufacture, fabricate or develop such toxins or related technology could require a mandatory CFIUS notification before closing.
How We Can Help
If you would like assistance submitting a public comment in response to the BIS proposed rule or seek guidance in evaluating how novel export controls, including those pertaining to emerging or foundational technologies, may affect your business please contact the authors or another member of Holland & Knight's International Trade Group.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.